Surge in Warehousing Costs Highlights UAE's Growing Role as a Global Logistics Center
During the first half of 2023, industrial and logistical space in Dubai recorded the strongest demand on record.
Dubai and Abu Dhabi rank globally seventh and 14th in warehousing costs respectively, underscoring the increasing prominence of the UAE as a major global player in the logistics industry, according to experts.
Strong demand for warehousing amid limited supply and rising costs have driven up total expenses, according to a study released by Savills.
As per the study that monitored 52 global markets over a period of 12 months, Dubai’s prime warehousing rents stand at $20.48 per sq. ft, while Abu Dhabi’s stand at $13.36 per sq. ft.
The top ranking of the two emirates signifies the UAE’s crucial role as a major regional player in the logistics and warehousing industry, attracting investment, generating employment, and enhancing and diversifying its economic and international standing, Savills said in its study report.
During the first half of 2023, industrial and logistical space in Dubai recorded the strongest demand on record, mainly driven by companies relocating their operations to Dubai from other locations. The near-shoring trend that many companies have adopted was also a reason for this demand surge, according to experts. There is also a spike in demand for logistics and industrial space due to the surge in local manufacturing, which is due to the UAE’s industrial strategy dubbed Operation 300bn, which aims to boost the country’s industrial sector, establish the UAE as a global exports and re-exports hub, and create new job opportunities.
In 2022, on average, warehouse lease rates continued to escalate across Dubai, specifically, Grade A rents in Al Quoz which increased by 57 percent during 2022. All industrial submarkets in Dubai experienced strong rent rises in 2022, reports said.
Across the markets monitored, total costs—comprising rents, service charges, and taxes — for prime warehousing space grew 10.1 percent in the 12 months to June 2023, says Savills.
The pace of property cost increases has slowed with H1 2023 seeing an increase of 4.4 percent in total costs, compared to 5.4 percent in the second half of 2022.
“The slower pace comes as vacancy rates rise from historic lows amid a weak economic backdrop and as more supply enters the market.”
London continued to lead the global warehousing costs at $42 per sq. ft, which was supported by solid fundamentals and a surge in demand for modern and efficient warehouse units. Los Angeles came in second at $27, followed by Sydney, Hong Kong, Northern New Jersey in the US, and Tokyo.
Another Savills study published in August of this year shows that the demand for industrial and logistical space in Dubai saw its strongest-ever performance on record.
Michael Fenton, director of Industrial & Logistics at Savills, said Dubai, and increasingly Abu Dhabi, have proved that the UAE is a dynamic economic hub in the Middle East characterized by growing demand, which is fuelled by a strong non-oil sector and the various economic partnerships signed by the UAE.
“This underlines the need for more supply of suitable facilities going forward.”
“Dubai’s high ranking combined with Abu Dhabi's presence in the top fifteen reflects the nation's strength in this vital sector and demonstrates international competitiveness, attracting businesses and investors from around the world,”
Savills report said.
News Source: Khaleej Times